General Insurance

Question 1

What is the law of large numbers?

Answer 1

The more people with similar risk the more accurately an insurance company can predict loss

Question 2

What are the different types of insurance companies

Answer 2

stock and mutual

Question 3

What is the law of agency?

Answer 3

You do not represent the client you represent the insurer.

Question 4

What are the elements of a legal contract?

Answer 4

1. agreement
2. consideration
3. competent parties
4. legal purpose

Question 5

What is risk?

Answer 5

the chance of a loss occuring.

Question 6

What is pure risk?

Answer 6

Situations that can only end in loss or no change. There is no option for financial gain. This is the only type of risk insurance companies will insure.

Question 7

What is speculative risk?

Answer 7

invoves the oppurtunity for loss or gain. Example gambling.

Question 8

What is exposure?

Answer 8

A unit of measure used to dermine rates for insurance coverage.

Question 9

What are the elements of exposure?

Answer 9

• age
• medical history
• occupation
• sex

Question 10

what is homoegenous?

Answer 10

Large groups having similar or same rask is called homogenous.

Question 11

What is a hazard?

Answer 11

situaton or conditions that increase the probability of loss occurring.

Question 12

What is physical hazards?

Answer 12

hazards occuring from strucutral or operational features of risk

Question 13

what are moral hazards?

Answer 13

refers to applicant who has lied on an application in the past.

Question 14

what are morale hazards?

Answer 14

increase the hazard because insured is reckless because they have insurance. “why should I care I have insurance.”

Question 15

what is a peril?

Answer 15

a cause of loss

Question 16

What is a loss?

Answer 16

reduction or disperence of value caused by a name peril.

Question 17

what is risk avoidance?

Answer 17

eliminating exposure to a loss.

Question 18

what is risk retention?

Answer 18

planned assumption of risk by an insured through use of deductible co payments or self insurance.

Question 19

What is the purpose of risk retention?

Answer 19

1. to reduce expenses and improve cash flow
2. to increase control of claim reserving claim settlements
3. fund for losses that cannot be controlled

Question 20

what is risk sharing?

Answer 20

people or businessses with smae or similar exposure share the losses with a group.

Question 21

risk reduction?

Answer 21

actons to lower impact of losses. Example smoke detectors or doctor checkups.

Question 22

what is risk transfer?

Answer 22

Transfer of risk to someone else

Question 23

What are the elements of insurable risk?

Answer 23

1. due to chance
2. definite and measurable
3. statistically predictable
4. not catastrophic
5. randomly selected and large exposure

Question 24

What is adverse selection?

Answer 24

insurance companies try to protect themselves from adverse selection which is people more prone to loss.

Question 25

what is a recpricoal?

Answer 25

a group that comes together to share risk

Question 26

what is an admitted or authorized insurer?

Answer 26

insurance company that has recieved a certifciate of authority.

Question 27

what is a domicile?

Answer 27

location where a company is incorporated.

Question 28

what is a foreign insurance company?

Answer 28

a copany incorporated in another state

Question 29

what is an alien insurance company?

Answer 29

a copmany incorporated in another country.

Question 30

what is reinsurance?

Answer 30

one insurance company copmesates losses of another insurance of its liabilities.

Question 31

what is express authority?

Answer 31

authority written within the contract.

Question 32

what is implied authority?

Answer 32

authority not written in the contract

Question 33

what is apparent authority?

Answer 33

apparent or assumption of coverage

Question 34

what is fiduciary responsibility?

Answer 34

someone is a postion of trust. They need to behave in an ethical manner.

Question 35

When does an offer happen?

Answer 35

when someone submits an application

Question 36

when does acceptance happen?

Answer 36

happens when the underwriter approaches the application.

Question 37

what is consideration?

Answer 37

something of value each party gives each other?

Question 38

What is aleatory

Answer 38

unequal values

Question 39

what is unilateral?

Answer 39

one sided. only one party makes a promise

Question 40

what is adhesion?

Answer 40

only one party prepares and the other accepts it as is. Take it or leave it

Question 41

what is a warranty?

Answer 41

a true statement on which policy depends.